Einhorn vs. Apple

I know what Steve Jobs would have done if David Einhorn had published a press release criticizing him for Apple's (AAPL) capital allocation strategy. He would have told Einhorn to pound sand.

But Apple didn't do that to Einhorn Thursday. Instead, it told the world that they would carefully study his suggestions.

This was an odd response since, according to Einhorn's press release on Thursday, his firm (Greenlight) had had several conversations with Apple since September around the issue of whether or not it was right for Apple to not eliminate its ability to issue preferred stock in the future. According to Einhorn, Apple had basically turned up its nose at his arguments against getting rid of this ability.

Yet after Greenlight's actions Thursday, which included the press release, Greenlight suing Apple and Einhorn going on CNBC to tell the world he thought Apple had a "depression-era mentality" of hoarding cash to the extreme, Apple seemed to blink.

Who's right? Apple or Einhorn? I would argue that it's the Apple shareholder.

Apple's stock ended up 3% Thursday, largely because it communicated that it was taking Einhorn's suggestions seriously.

Why didn't Apple do this in private with Einhorn? It ends up looking like it's reacting to the public pressure instead of doing what was right by its own volition ahead of time without the public ever knowing about Einhorn's demands. It's not very regal.

In the short term, any additional steps to return capital to shareholders is likely going to be very welcome by Wall Street. Many people piled into the stock last year on the expectation that they were going to be getting more access to this growing cash. It didn't happen and it partly led to the pulling out of capital we've seen in the stock since September.

But all the regular criticisms against Apple that we're used to hearing -- "They can't innovate anymore" and "Steve Jobs isn't alive anymore" -- will still exist after any change in capital allocation policy. It will still hang over the stock until the company delivers some really cool stuff that no one expects.

But will any shareholder care in the meantime? Not in the least. The stock likely can pop back up over $500 and get closer to $550 just on hopes of more cash coming back.

Where will the blame for this lie if Apple does cave to David Einhorn after blowing him off? Peter Oppenheimer seems to be on the hook for that one. He's recently asked Tim Cook permission to change the way he reports some of the financial data to Wall Street that produced some grumblings after the last call. He also declared that Apple would become more realistic in how it reports future earnings expectations.

Oppenheimer's decided to stretch to do things the way he's always wanted, a way he likely wasn't allowed to under Steve Jobs. Tim Cook's given him the rope to do things his way. So far, Oppenheimer hasn't shone.